To date, the country's total estimated potential of untapped geothermal resource is about 2,600 MW. For the succeeding ten years, plans to develop proven reserve areas will make possible the availability of a maximum capacity of 1,200 MW of this estimated potential. Of these potentials, about 610 MW are situated within service contract areas belonging to the government-owned Philippine National Oil Corporation-Energy Development Corporation (PNOC-EDC)(Table 4).

There are two committed plants in the geothermal power plant line-up, namely: PNOC-EDC's 80-MW Northern Negros plant in Negros Occidental due for commissioning in 2005 and the Palinpinon 40-MW optimization project in 2006. Meanwhile, as part of PNOC-EDC's aggressive geothermal development, drilling of exploratory wells are slated to begin in 2003 for its prospects in Mt. Lobi and Mt. Cabalian, both located in Southern Leyte, which are expected to confirm steam reserves (Figure 6).

Incentives

Current incentives for geothermal service contractors are enumerated under Presidential Decree No. 1442, otherwise known as "An Act to Promote the Exploration and Development of Geothermal Resources". These are:

1. Recovery of operating expenses not exceeding 90 percent of the gross value in any year with carry -forward of unrecovered cost

2. Service fee of up to 40 percent of the net proceeds

3. Exemption from all taxes except income tax

4. Exemption from payment of tariff duties and compensating tax on the importation of machinery, equipment, spare parts and all materials for geothermal operations

5. Depreciation of capital equipment over a ten (10) year period

6. Easy repatriation of capital investments and remittance of earnings

7. Entry of alien technical and specialized personnel (including members of immediate family

Challenges and Gaps

Despite being endowed with numerous active geothermal areas, the country's substantial potential for geothermal energy remains to be harnessed notwithstanding government's efforts to promote greater investments in this sector. As the DOE endeavors to increase the utilization of geothermal energy, strategies, plans and programs are being pursued to encourage entry of more investors into the sector. However, more efforts need to be exerted to spur development in this sector.

Lack of awareness and interest in investment opportunities

There has been limited private sector investment in steamfield development. To-date, there are only two geothermal steamfield developers in the country, namely PNOC-EDC which operates a majority of the existing geothermal contract areas and Philippine Geothermal Incorporated (PGI), a subsidiary of the Union Oil of California (UNOCAL).

Environment and socio-cultural concerns

With the passage of laws for the preservation of the environment such as Republic Act 7586, or the National Integrated Protected Areas System (NIPAS) Act, and the empowerment of the cultural minorities such as Republic Act 8371, otherwise known as "Indigenous People's Rights Act (IPRA) of 1997, environmental and socio-cultural concerns are now considered critical factors in geothermal resource development. There is a need for the harmonization of the NIPAS and IPRA as these pose problems to RE investors in prospect areas that are both protected areas and ancestral lands. Moreover, acceptability of geothermal projects in view of these concerns may prolong the gestation period of geothermal projects and entail additional costs.

Technological constraints

The development of some promising geothermal areas has been temporarily set aside pending technological breakthroughs in handling acidic wells. An example is Mt. Labo which is located within the boundaries of Quezon, Camarines Sur, and Camarines Norte. Eight wells have been drilled in Mt. Labo from 1990 to 1997 but all intersected acidic geothermal fluids. Similarly, the wellhead assembly at Alto Peak area of Tongonan Field in Leyte suffered a blowout and was knocked off due to the fast rate of corrosion from geothermal fluids. Unless innovative technologies are developed to handle these natural constraints, harnessing of Mt. Labo and Alto Peak (with combined resource potential of 80 MW) and other areas with significant resource potentials may be delayed.

Lack of investment in non-power applications

The country has yet to take off in terms of development of non-power applications of geothermal energy resources. Mainly resulting from a lack of financing and public awareness, the development of spa resorts and crop drying facilities using geothermal heat is still in the early stages.

While there is a huge potential for geothermal heat in crop drying, harnessing of this potential is hampered by the preference for sunlight, which is the traditional source of energy for drying in the country. People have yet to realize the benefits of using geothermal heat, especially in terms of time saved in drying owing to its high temperature and non-seasonality compared to sunlight. The ideal use of geothermal heat, which will bring about large savings in fossil energy consumption, will be for industrial purposes. In this light, bringing geothermal heat to industrial installations or bringing industries near geothermal fields poses an additional challenge in order to achieve increased use of the resource in industries. Examples of such industries include pulp and paper, veneer factory, timber drying, beer brewery and distillation and confectionary industry.

PROGRAMS AND PROJECTS

The DOE will conduct international and local promotion of investment opportunities in Philippine geothermal exploration and development to increase private sector investments and encourage the entry of modern and innovative technologies. Exploration programs, including reconnaissance activities and semi-detailed studies of potential geothermal areas will be sustained to provide sufficient information to prospective developers and investors. Socio-economic profiling of at least seven prospects will also be continued to provide a glimpse of the geothermal utilization demand in the target areas.

Optimal use for non-power applications

To demonstrate the government's efforts to focus on promoting the non-power application of geothermal resources, proposals for a multi-crop dryer project in Leyte and for the enhancement of the self-reliant multi-crop dryer project in Manito, Albay will be pursued. A showcase project exists in the Palinpinon geothermal complex in Southern Negros facilitating the operations of a local cooperative on agricultural products.

In addition, close cooperation with the Department of Tourism (DOT) and the Philippine Institute of Traditional and Alternative Health Care (PITAHC) for promoting hot spring areas for possible spa resort development will likewise be pursued. The project will revitalize the use of geothermal resources for balneology and therapeutic purposes. Site assessment of four more areas, namely Camiguin Island in Cagayan, Mt. Apo in Cotabato, Northern Negros and Tuba in Benguet will be conducted.

A Memorandum of Agreement (MOA) was forged in May 2002 to delineate the scope of cooperation. The DOT will lead the implementation of the project and will prepare an investment promotion package for spa resort development. On the other hand, DOE will identify the hot spring areas favorable for spa resort development. The PITAHC will train the locals on therapeutic massage and the use of herbs for therapy.

Intensive promotion of geothermal energy

Geothermal energy exploration and development will be a part of the DOE's aggressive investment promotion campaigns. Public awareness campaigns will be conducted to boost private sector investments in geothermal projects, enhance its acceptability and harmonize the same with environmental and social concerns, as highlighted by the enactment of NIPAS and IPRA, respectively.

As an initial effort, international cooperation for the Coordinating Committee on Coastal and Offshore Geoscience Programme (CCOP) Project on Regional Geothermal Database Compilation shall continue until 2006. The project aims to produce base maps and a geothermal database in CD-ROM.

Meanwhile, the DOE recently entered into an agreement with the DENR to consider geothermal areas for use as airsheds. Under Memorandum Circular (MC) No. 2002-13 issued by the DENR, geothermal airsheds shall be provided for geothermal areas with existing projects and those listed in the PEP and other areas designated by DOE as well as areas that may be affected by the dispersion of air pollutants from geothermal operations. The guidelines embodied in the MC are expected to facilitate the compliance of the geothermal power sector with the Clean Air Act (R.A. 8749).